A loan from three international banks pushed Kenya's public debt up at the end of June to Sh1.63 trillion. This was a 1.5 percent increase from the position in May with debt now accounting for 49.4 per cent of the Gross Domestic Product, according to official statistics from the Ministry of Finance
The increase in public debt was attributed to Sh50.54 billion disbursements from the International Syndicated Bank Loan which was contracted as a substitute for domestic borrowing. The government obtained syndicated loan from a consortium of Citibank, London Branch, Standard Bank of South Africa and Standard Chartered Bank, London to be repaid within the next two years at 4.75 percent rate to plug the 2011/2012 budgetary shortfall replacing a planned Eurobond.
This saw external debt rise by Sh53.51 billion to stand at Sh 774.55 billion while domestic debt declined by Sh30.03 billion to stand at Sh 858.83 billion in June. The structure of public and publicly guaranteed debt shows that 52.6 per cent of the total debt is domestic debt while the rest is external debt 47.4 per cent as the ministry says external concessional borrowing remains the focus of Government policy.
This external debt strategy is meant to minimise interest rate cost, the average interest rate and grace period on the external debt portfolio was 0.8 per cent and 6.2 years, "As an indication of the success in lengthening the maturity structure of domestic debt to minimise refinancing risk in line with the Medium Term Debt Strategy, the average maturity profile of outstanding Government domestic debt stood at 5 years 2 months at end June 2012, "said the ministry.
Energy and Infrastructure sector has been receiving the biggest share of the external loan funding getting more than 37 per cent of the total, others like agriculture received 11.7 per cent, water and housing getting 8.1 per cent and health and sanitation received 7.9 per cent. On the domestic borrowing, during the month of June 2012, Government securities worth sh 23.00 billion were advertised but only bids worth external Sh13.50 billion were received. Out of these, bids for the Treasury Bills and Treasury Bonds were Sh9.43 billion and Sh4.07 billion respectively.
Commercial banks held the largest proportion of the outstanding government debt securities amounting to Sh411.87 billion which was 47.96 per cent . Non-bank institutions like National Social Security Fund (NSSF), parastatals, insurance companies, building societies, pension funds and individuals held 45.24 per cent while 1.28 per cent was held by non-residents.